A Beginner’s Guide to Retirement Pension Plans in India

Retirement Planning as a concept is still in its nascent phase in India, with very few actually giving it the due it deserves. A majority of the workforce is so caught up in meeting the needs for the present that the preparation for their future, post retirement takes a back seat. But the fact is that if you wish to be financially independent even after you are retired, you must work on retirement and pension plans from early on. For this, you have to calculate your expenses and needs that you are likely to have during your life as a retired individual. This would motivate you to be prudent about your expenses, increasing your savings for necessary investments as a part of your retirement planning.

You become used to living life in a certain way, especially when you have the means and you can afford the things you want. But the same may not be possible once you retire from your job. This is something that needs consideration. Hence, if you want your retired life to go as smooth as it is going now, you need to make certain pension plans.

Life can become difficult if you have to forgo things that you are used to because of lack of funds. Moreover, after you retire from your job; you actually find time to work on your retirement bucket list; do things that you always wished to do but never had the time. If you plan your finances well you would not only be financially independent to take care of your needs but also live the life that you wished for.  For instance, you can travel or pursue a new hobby.

Hence, planning your retirement is essential. Moreover, with the increasing life expectancy of people these days, pension plans have become all the more significant.

Factors to take note of while opting for the best Pension Plans

Retirement Planning has become indispensable considering the fact that living costs would continue to increase as will the inflation. Also, the health complications that are plaguing mankind, especially the senior citizens need advanced healthcare facilities; which do not come cheap.

Therefore below are certain suggestions that would help you in choosing the best pension plans for retirement saving.

Your return on investment rate should be higher than the inflation rate –

Retirement Planning is a long-term goal, which many people might find difficult to continue, especially with the changing rates of inflation. There may be a time when inflation can unconstructively impact your capital and assets held for a long term.  Thus, having a higher return on investment as compared to the inflation rate is always necessary.

Choose a Pension Plan that suits you accurately

While planning for your retirement, you must keep in mind the needs and aspirations of your family as well. You can’t miss out on the fact that you might have to provide for your family even after you are retired.  Also, you might like to calculate the financial security of your family when you are gone forever. Thus, you may like to have enough funds/retirement savings that can make your family’s living comfortable even after you are not there. Also, tax deductions should be taken into consideration while planning for retirement savings.

Go for plans with low risk but regular and consistent returns

It is necessary to take risks if you want to expand your wealth. But if you are already late in planning for your pension and on the verge of retirement, you must choose plans with lower risks and greater returns. Thus, it is best to stick to a low-risk amount or plans offering guaranteed return so that you can avoid market volatility.

Vesting Period

While opting for a retirement plan, it is important to ensure that you buy a policy that allows a vesting period matching your needs.  There are several pension schemes available in India. Some of these schemes may allow you to buy plans to stay secure financially at a young age, while you can also buy security at a time when you are nearing your retirement age. People can choose from a range of pension plans after reaching their 40s or even in their 60s in case of late retirement preparations.

Buy a plan that allows appropriate annuity options

This is another important aspect to keep in mind while choosing the best retirement pension plans. So, always go for plans offering the best annuity of your choice. There are some long-term pension plans which allow guaranteed annuity for a certain number of years irrespective of whether the insured is alive or dead.  Conversely, there are plans that offer annuities to the nominee of the insured following his/her death.

Consider costs

It is equally important to constantly keep looking for options for better and low cost pension plans in India with high returns. Thus, understanding various savings plans thoroughly and examining their varied features is important before making a selection to suit your requirements best.